U.S. EX REL. DRESCHER v. HIGHMARK

The opinion of the court was delivered by: ANITA BRODY, District Judge

MEMORANDUM AND ORDER

I. INTRODUCTION

The United States of America and relator Elizabeth Drescher filed this
qui tam action against Highmark, Inc. ("Highmark") for
violations of the False Claims Act*fn1 ("FCA"),
31 U.S.C. § 3729(a)(1),
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for recovery of Medicare overpayments pursuant to
the Medicare Secondary Payer Statute ("MSP"),
42 U.S.C. § 1395y(b)(2)(B)(ii), and for unjust enrichment and breach of
contract. Counts I and II are claims against Highmark for violations of the
FCA in its capacity as a private insurer and in its capacity as a public
insurer, respectively. Count III is a claim against Highmark in its
capacity as a private insurer for recovery of Medicare overpayments
pursuant to the MSP statute, 42 U.S.C. § 1395y(b)(2)(B)(ii). Count IV
is a claim against Highmark in its capacity as a private insurer for
unjust enrichment, and Count V is a claim against Highmark in its public
capacity for breach of its contract with the Health Care Financing
Administration ("HCFA") to perform services as a Medicare Part A fiscal
intermediary and as a Medicare Part B carrier.*fn2 In addition to the
five counts alleged by the United States in its complaint, the relator's
personal claims against Highmark for unlawful retaliation pursuant to
31 U.S.C. § 3730(h) also remain.*fn3

Presently before the court are Highmark's motion to dismiss all counts
contained in the United States' complaint in intervention and Highmark's
motion to dismiss the relator's retaliation claims. For the reasons set
forth below, I deny Highmark's motions.
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II. BACKGROUND

A. Medicare System

Medicare is a federal insurance program administered by the Department
of Health and Human Services ("HHS"), Center for Medicare and Medicaid
Services ("CMS"), and established by Congress to pay the costs of health
care services provided to individuals who are elderly, disabled, or
extremely ill as a result of contracting End-Stage Renal Disease
("ESRD"). 42 U.S.C. § 1395-1395gg; 42 C.F.R. Part 405 et
seq. The Medicare Program is comprised of two parts: Medicare Part A
helps pay for inpatient hospital services, nursing home and hospice care,
and in some instances home health services; Medicare Part B provides
federal government funds to help pay for outpatient hospital services,
doctor's visits, certain durable medical equipment and supplies, and, in
some instances, home health services. (Compl. ¶ 10.)

The United States pays for services provided to Medicare beneficiaries
through CMS. (Compl. ¶ 11.) CMS, however, does not directly process
Medicare claims. Rather, CMS contracts with private companies to handle
claims processing responsibilities.*fn4 (Compl. ¶ 11.) "Fiscal
intermediaries" is the term used to refer to private insurance companies
that process Medicare Part A and some Part B claims. Private insurance
companies that process the bulk of Medicare Part B claims are referred to
as "carriers." (Compl. ¶ 11.) Pursuant to contracts with CMS,
carriers and intermediaries (collectively "contractors") perform claims
processing functions, including making determinations whether submitted
claims should be paid. (Compl. ¶ 12.) When a contractor approves a
Medicare claim, the contractor pays the claim with funds from the
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taxpayer-funded Medicare Trust Fund. (Compl. ¶ 12.) In the
process of paying a claim with Medicare funds, the contractor must
"certify that all payments are in accordance with applicable law and
Medicare rules and instructions." (Compl. ¶ 12.) Contractors are
compensated for performing these functions through administrative
payments from the United States. (Compl. ¶ 12.)

B. Medicare as Secondary Payer

In certain cases an individual who is otherwise eligible for Medicare
coverage also has private group health plan coverage through an Employer
Group Health Plan ("EGHP"). (Compl. ¶ 13.) Congress endeavored to
coordinate the provision of payment in situations in which an individual
has overlapping Medicare benefits and private insurance coverage by
enacting the MSP statute. Essentially a cost-cutting amendment, "[t]he
MSP statute was designed to curb skyrocketing health costs and preserve
the fiscal integrity of the Medicare System." Fanning v. United
States, 346 F.3d 386, 388 (3d Cir. 2003) (citations omitted). The
MSP statute and related regulations dictate when Medicare will pay a
medical claim as the "primary payer," and when Medicare will pay as the
"secondary payer." (Compl. ¶ 14.) Because a "secondary payer" is
responsible for, at most, that portion of a claim for which the primary
payer's coverage did not provide payment, the secondary payer generally
pays a smaller portion of a claim than the amount paid by the primary
payer. (Compl. ¶ 14.)

Generally, under the MSP statute and related regulations, the private
insurance carrier is
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the primary payer.*fn5 See, e.g.,
42 U.S.C. § 1395y(b)(1)(A),(B); 42 C.F.R. § 411.172, 411.101, 411.204. While
this is the general rule, two exceptions are made for small employers.
Specifically, in the case of working aged beneficiaries (age 65 or older)
participating in group health plans sponsored by an employer or employee
organization, Medicare becomes the primary payer if the employer has
fewer than 20 employees. 42 U.S.C. § 1395y(b)(1)(A)(ii). In the case
of employees who are under age 65 and covered under a group health plan,
but are entitled to Medicare by virtue of a disability, Medicare will be
the primary payer if the employer has fewer than 100 employees. (Compl.
¶ 18.)

C. The Life of a Claim

The MSP claims process begins with the provider of health care
services. After furnishing services, the provider makes an initial
determination whether a claim will be submitted to a private insurance
contractor or to a Medicare contractor. (United States' Supp. Br. in
Opp'n to Highmark's Mot. to Dismiss [hereinafter U.S. Supp. Br.] at 3.)
In this regard, CMS directs providers to ask patients a series of
questions designed to elicit whether Medicare or a private insurer is the
primary payer. CMS Hospital Manual § 301.2, Part III, "Types of
Admission Questions To Ask Medicare Beneficiaries." Likewise, if the
provider determines that the claim should be submitted to Medicare, the
MSP statute requires that the provider use the information obtained from
the individual in order to complete a Medicare claim form.
42 U.S.C. § 1395y
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(b)(6). If the provider determines that a private insurer
should pay as primary, the provider will submit the claim first to the
private insurer. (United States' Supp. Br. in Opp'n to Highmark's Mot. to
Dismiss [hereinafter U.S. Supp. Br.] at 3.) Upon receipt of the claim,
the private insurer makes an independent determination regarding their
obligation to pay the claim. Id. at 3-4. While the precise
nature of the system used by a private insurer to determine whether to
pay or deny a submitted claim, including any criteria or sources of
information used, is notably absent from the parties' filings, it is
axiomatic that the private insurer must have some mechanism through which
these decisions, a routine and integral aspect of their operations, are
made. If the private insurer refuses to pay the claim, the denied claim
is returned to the provider. (U.S. Supp. Br. at 4.) Thereafter, the
provider may submit the claim to a Medicare contractor for payment from
the Medicare Trust Fund. (U.S. Supp. Br. at 4.)

Highmark is a Pennsylvania based corporation and acts both in a private
capacity as an insurer and in a public capacity as a Medicare contractor.
In its private capacity, Highmark is a private insurance carrier that
insures and administers EGHPs.*fn7 In its public capacity, Highmark
processes claims, performs customer service, and maintains provider
relations for the Medicare
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program pursuant to contracts with CMS. Highmark operates as a
Medicare Part A fiscal intermediary through its division Veritus Medicare
Services ("Veritus") and as a Medicare Part B carrier through its
division HGS Administrators ("HGS"). (Compl. ¶ 6.)

While the submissions of the parties are devoid of information
concerning the actual process by which Highmark, acting as a private
insurer, makes a determination whether to pay or deny a claim and how
Highmark obtains the data used to make that determination, the United
States' complaint does make allegations through which certain features of
Highmark's claims processing system can be inferred. Specifically, the
complaint alleges that Highmark's predecessors, Blue Cross of Western
Pennsylvania and Pennsylvania Blue Shield, entered into a settlement with
the United States in July 1995 concerning allegations of wrongdoing under
the MSP statue. (Compl. ¶ 28.) The United States further alleges that
Highmark is bound by the terms of that settlement which included
obligations that the settling plans "review [] current data collection
efforts and modify existing data collection procedures if necessary to
comply with the terms of the settlement agreement," including "the
obligation to make a primary/secondary determination with respect to
Medicare eligible employees and beneficiaries based on the best available
membership data collected." (Compl. ¶¶ 30, 31.) The relator, Elizabeth
Dresher, is an employee of Highmark who was appointed in July 1996 to the
position of project manager responsible for the company's implementation
of the 1995 settlement agreement between the government and BCBSA. At
some point, it is alleged that her tasks were expanded to include "more
general MSP compliance issues." (Compl ¶ 7.)
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III. STANDARD OF REVIEW

A motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) challenges the legal sufficiency of the complaint. Kost v.
Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In ruling on a motion
to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a court
must "accept as true the factual allegations in the complaint and all
reasonable inferences that can be drawn therefrom." Nami v.
Fauver, 82 F.3d 63, 65 (3d Cir. 1996). Since the court must
determine whether "under any reasonable reading of the pleadings, the
plaintiff may be entitled to relief," a claim may be dismissed only "if
it appears that the plaintiffs [can] prove no set of facts that would
entitle them to relief." Id.

IV. DISCUSSION

A. The False Claims Act  Count I

In Count I, the United States alleges that Highmark violated the FCA in
its capacity as a private insurer. The False Claims Act extends civil
liability to any person who:

(1) knowingly presents, or causes to be presented,
to an officer or employee of the United States
Government or a member of the Armed Forces of the
United States a false or fraudulent claim for
payment or approval;

(2) knowingly makes, uses or causes to be made or
used, a false record or statement to get a false
claim or fraudulent claim paid or approved by the
Government;

(3) conspires to defraud the Government by getting
a false or fraudulent claim allowed or paid;

***

(7) knowingly makes, uses or causes to be made or
used, a false record or statement to conceal,
avoid, or decrease an obligation to pay or
transmit money or property to the Government, is
liable to the United States Government for a civil
penalty of not less than $5,000 and not more than
$10,000, plus three times the amount of damages
which the Government sustains because of the act
of that person. . . .
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31 U.S.C. § 3729(a).

To establish a prima facie case under § 3729(a)(1) of the False
Claims Act the United States must prove: (1) the defendant presented or
caused to be presented to an agent of the United States a claim for
payment; (2) the claim was false or fraudulent; and (3) the defendant
knew the claim was false or fraudulent. Hutchins v. Wilentz et
al., 253 F.3d 176, 182 (3d Cir. 2001) cert. denied,
536 U.S. 906 (June 10, 2002). Liability under the FCA will not attach unless
the plaintiff can satisfy his or her burden of proof with respect to each
of the three elements. Because satisfaction of the first element of the
FCA is the most problematic in this case, I will first discuss the second
and third elements of a prima facie case under the False Claims Act,
followed by a lengthier analysis of the requirements necessary to satisfy
the first element.

To satisfy the second element of the FCA, the United States must
establish that the claim was false or fraudulent.
31 U.S.C. § 3729(a)(1). Under the FCA, a claim "includes any request or
demand . . . for money . . . if the United States Government provides any
portion of the money . . . which is requested or demanded."
31 U.S.C. § 3729(c). Furthermore, because "[t]he False Claims Act seeks to
redress fraudulent activity which attempts to or actually causes economic
loss to the United States government," liability does not attach unless
the claim "would result in economic loss to the United States
government." Hutchins, 253 F.3d at 184. Although the terms
"false or fraudulent" are not defined in the FCA, "the juxtaposition of
the word `fraud' with the word `false' plus the word `claim' suggests
that a false or fraudulent claim is one aimed at extracting money the
government otherwise would not have paid." United States ex rel.
Michael D. Watson v. Conn. Gen. Life Ins. Co., Civ. Action 98-6698,
2003 WL 303142 (E.D. Pa. 2003) at * 4 (internal
Page 10
citations omitted) (citing Mikes v. Straus, 274 F.3d 687,
696 (2d Cir. 2001)). Moreover, because the Supreme Court has held that
the FCA "is intended to reach all types of fraud, without qualification,
that might result in financial loss to the Government" and "reaches
beyond `claims' which might be legally enforced, to all fraudulent
attempts to cause the Government to pay out sums of money," the term
"false or fraudulent claim" should be construed broadly. United
States v. Neifert-White Co., 390 U.S. 228, 232-33, 88 S.Ct. 959,
19 L.Ed.2d 1061 (1968).

In the complaint, the United States alleges that Highmark, as a private
insurer or administrator, improperly paid MSP claims as the secondary
payer when it should have paid them as the primary payer. (Compl. ¶
35.) Tying Highmark's private claims processing system to claims
presented to Medicare for payment, the United States alleges that:

[W]hen a private insurer, such as Highmark, pays
claims as secondary payer or refuses to pay claims
at all, based on supposed coverage by Medicare as
the primary payer, the provider or beneficiary
will typically submit the claims to Medicare for
primary payment. If Medicare is unaware of the
private insurer's obligation to pay primary,
Medicare will pay those claims as primary rather
than as secondary.

(Compl. ¶ 38.) The United States alleges that as a result of
Highmark's knowing dereliction of its obligation to pay certain claims or
to pay as the primary payer, claims that should have been paid by
Highmark were ultimately presented to and paid by Medicare.
(See Compl. ¶ 38.) These allegations sufficiently state a
claim under the second element of the FCA for purposes of avoiding
dismissal under Federal Rule of Civil Procedure 12(b)(6).

To satisfy the third element of the FCA, the United States must
establish that Highmark "knew the claim was false or fraudulent."
Hutchins, 253 F.3d at 182. In the context of the False
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Claims Act, the term "knowingly" is defined as follows:

"knowing" and "knowingly" mean that a person, with
respect to information 

(1) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or
falsity of the information; or

(3) acts in reckless disregard of the truth or
falsity of the information, and no proof of
specific intent to defraud is required.

31. U.S.C.A. § 3729(b). In the complaint, the United States
asserts that Highmark was aware of applicable regulations regarding
primary/secondary payment and knew that it was not accurately processing
MSP claims. (Compl. ¶¶ 33, 73.) In support of this conclusion, the
United States avers that Highmark actually obtained information relevant
to making accurate determinations regarding Highmark's payment
obligations but nonetheless failed to incorporate such information into
its claims processing systems. (Compl. ¶ 33.) Thus, with regard to
the third element of a prima facie case under the FCA, the United States
has likewise stated a claim upon which relief could be granted.

To establish the first element of their prima facie case, the United
States must prove that Highmark, in its private capacity, presented or
caused to be presented to Medicare a claim for payment.
Hutchins, 253 F.3d at 182. Because the United States does not
allege that Highmark, in its capacity as a private insurer, directly
presented claims to Medicare for payment, the United States is proceeding
under the theory that Highmark caused certain claims to be
presented to Medicare. (Compl. ¶ 72.)

The novel theory that the United States presents can be summarized as
the following chain of events: (1) Highmark, as result of violations of
the MSP rules, incorrectly denied claims or paid claims as the secondary
payer when it should have paid as the primary payer; (2) as a result of
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Highmark's denial or secondary payment, the claims were returned to
the providers who originally submitted them; (3) upon receipt of a claim
that was denied or not paid in full, the providers then submitted the
claim to Medicare for payment; (4) Medicare paid the claim, or paid the
claim as primary, even though it may not have been obligated to under
law.

The applicability of the FCA to this theory of liability has never
before been tested. However, although "[t]he archetypal qui tarn FCA
action is filed by an insider at a private company who discovers his
employer has overcharged under a government contract," courts have been
willing to entertain FCA actions under numerous alternative theories.
United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266
(9th Cir. 1996) (internal citations omitted) (listing theories of
liability); see, e.g., United States ex rel. Hagood v. Sonoma County
Water Agency, 929 F.2d 1416 (9th Cir. 1991)
("fraud-in-the-inducement" cases, i.e. finding FCA liability when a
contract was originally obtained based on false information); United
States v. Hibbs, 568 F.2d 347 (3d Cir. 1977) ("false certification"
cases, i.e. finding FCA liability where defendant falsely certified
compliance with certain requisite conditions in order to fraudulently
induce government benefit); United States v. Aerodex,
469 F.2d 1003 (5th Cir. 1972) (finding FCA liability where defendants supplied
substandard products or services under government contract). More
importantly in the context of the present action, the Third Circuit has
also recognized FCA actions in cases in which a "defendant causes, or
will cause, [an] intermediary to make a false claim against the
government resulting in a financial loss to the treasury."
Hutchins, 253 F.3d at 185; see, e.g., United States v.
Bornstein, 423 U.S. 303, 309, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976)
("It is settled that the Act . . . gives the United States a cause of
action against a subcontractor who causes a prime contractor to submit a
false claim to the Government.").
Page 13

In Hutchins, the issue presented to the Third Circuit was
whether a law firm's submission of fraudulent legal bills for
approval by the United States Bankruptcy Court violated the FCA even
though no claim was made against United States Treasury money in
connection with the firm's fraudulent act. Hutchins, 253 F.3d
at 182. Although the Third Circuit held that the FCA "only prohibits
fraudulent claims that cause or would cause economic loss to the
government," the court pointed out that in cases in which a defendant
caused an intermediary to make a false claim against the government,
"[t]he intermediary need not have discretion over, or even possession of,
the government funds to establish that the defendant violated the False
Claims Act." Hutchins, 253 F.3d at 185.

Although the potential for liability under the FCA in situations in
which there is a degree of separation between the defendant and the
government entity to which claims are ultimately presented is well
settled, there is an important distinction between cases which have
recognized this kind of liability and the present action. In cases
recognizing the liability of a defendant who "causes" an intermediary to
submit a false or fraudulent claim to a government entity, the factual
scenario is typically such that the intermediary is "merely a conduit to
the transfer of government funds." Hutchins, 253 F.3d at
185-86. For example, in United States v. Murph, the Sixth
Circuit affirmed a conviction under 18 U.S.C. § 2(b) and 287*fn8 of
a defendant who sold a false income tax
Page 14
return to a discounter knowing "that the discounter was buying it
for the purpose of presenting it to the government for a refund."
707 F.2d 895, 896 (6th Cir. 1983) (per curiam). Although the defendant in
Murph argued that his scheme, and his potential liability,
ended when he sold the fraudulent tax return to the tax discounter, the
Sixth Circuit held that because the defendant knew that the tax
discounter intended to present the return to the government for payment,
"[t]his further act on behalf of the discounter was clearly understood
and foreseen by the defendant," such that the "defendant `caused' the
return to be presented within the meaning of the Act." Murph,
707 F.2d at 896.

The United States has asked this court to extend liability to Highmark
for the providers' submission of rejected claims to Medicare. While the
direct presentation of claims to the government is not a necessary
prerequisite for liability under the FCA, it is equally true that the
government must not be given carte blanche to proceed under the
FCA using indirect theories of causation which offer only attenuated
links between the parties.*fn9 In assessing this claim, this court will
utilize traditional principles of causation analysis to determine when
parties should be subject to potential liability under the FCA, i.e. when
it can fairly be said that a party "caused" a claim to
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be presented to the government. In fact, the Third Circuit has used
this approach to limit potential liability under the FCA with respect to
applicable damages. Hibbs, 568 F.2d at 349; see also
United States ex rel. Cantekin v. Univ. of Pittsburgh, 192 F.3d 402,
416 (3d Cir. 1999), cert. denied 531 U.S. 880 (2000)
(recognizing applicability of the "basic principle of tort law that once
a defendant sets in motion a tort, the defendant is generally liable for
the damages ultimately caused, unless there are intervening causes" in
assessing damages under the FCA). Specifically, the Third Circuit has
held that in assessing damages under the FCA, "a causal connection must
be shown between loss and fraudulent conduct" and that "a broad `but for'
test is not in compliance with the statute." Hibbs, 568 F.2d at
349. It would seem that a similar causation analysis must be conducted
before a party is held liable under the FCA for causing a false or
fraudulent claim to be presented to the United States government.

Applying such an analysis to the allegations at hand, it can be said
that when an intermediary serves as "merely a conduit" to the submission
of a false or fraudulent claim, a direct causal relationship can be
inferred between the party who submitted the claim to the intermediary
and the party who received the claim from the intermediary. See
Hutchins, 253 F.3d at 185; Murph, 707 F.2d at 896.
Although this case presents a situation in which FCA liability is
likewise predicated upon the presentation of a claim by an intermediary
of sorts, namely numerous unidentified providers, the provider is a
different kind of "intermediary" than those present in prior cases.
Providers in receipt of claims rejected by Highmark are not merely
conduits  they do not pass claims along to the government in the
same foreseeable and predictable sense as, for example, the tax
discounter in Murph. In this case, the chain of causation
between Highmark's rejection of a claim submitted by a provider, and the
subsequent presentation of that claim by the provider to
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Medicare, is more tenuous. While a simple "but-for" analysis may
connect Highmark to the ultimate presentation of the claim to Medicare,
something more is probably needed to establish liability under the FCA.

That being said, a thoughtful analysis of the law has persuaded me to
abandon my initial inclination to grant defendant's motion to dismiss
because of the potential existence of sets of facts under which Highmark
may, in fact, be liable under the FCA. For instance, the parties'
submissions fail to address aspects of the process through which Highmark
notifies providers of their refusal to pay a claim, or to pay the claim
as secondary payer. If Highmark, for instance, specifically directs the
provider to submit the claim to Medicare for payment, or otherwise
suggests to the provider that Medicare should be the primary payer, then
the United States may have a claim against Highmark under the FCA.*fn10
For this reason, I will allow the United States to go forward on its
claim in Count One of its complaint. It is equally possible, however,
that further development of the facts of this case will establish that
the United States cannot substantiate the chain of causation necessary to
proceed. For instance, if Highmark rejects a claim without any further
direction to the provider, it is unclear from the parties' submissions
what options are available to a provider  perhaps the provider
will send the claim to Medicare, or, alternatively, perhaps the provider
will dispute Highmark's rejection of the claim. These are only possible
scenarios surmised by the court, and this court does not imply that other
courses of action, or lack thereof, are not possible. Suffice it to say,
however, that the more options a provider has when presented with a
rejected claim, the less likely the United States will be able to sustain
the
Page 17
necessary causal connection between Highmark's rejection of a claim
and the provider's presentation of that claim to Medicare.*fn11

B. The False Claims Act  Count II

In Count II the United States alleges that Highmark, through its
divisions Veritus and HGS, violated the FCA in its public capacity as a
Medicare contractor. The United States claims that the public side of
Highmark violated Section 3739(a)(1) of the FCA in two ways: (1) Highmark
presented false or fraudulent claims for payment against the Medicare
Trust Fund by knowingly paying claims from the fund as a primary payer in
situations in which Highmark, as a private insurer, actually had primary
payer responsibility; and (2) Highmark presented false or fraudulent
claims by billing CMS for contractual administrative services performed
in breach of the parties' contract. (Compl. ¶ 76-77.)

As an initial matter, it should be noted that in United States ex
rel. Body v. Blue Cross and
Page 18
Blue Shield of Alabama. Inc., 156 F.3d 1098, 1111 (11th
Cir. 1998), the Eleventh Circuit held, as a matter of first impression,
that subsection 1395h(i)(3) of the Social Security Act "gives fiscal
intermediaries full immunity from liability for payments that are
certified by its certifying officers and issued by its disbursing
officers." Subsection 1395h(i) provides:

(1) No individual designated pursuant to an
agreement under this section as a certifying
officer shall, in the absence of gross negligence
or intent to defraud the United States, be liable
with respect to any payments certified by him
under this section.

(2) No disbursing officer shall, in the absence of
gross negligence or intent to defraud the United
States, be liable with respect to any payment by
him under this section if it was based upon a
voucher signed by a certifying officer designated
as provided in paragraph (1) of this subsection.

(3) No such agency or organization [such as a
fiscal intermediary] shall be liable to the United
States for any payments referred to in paragraph
(1) or (2).

42 U.S.C. § 1395h(i). The Eleventh Circuit reasoned that the
contrast between the limited immunity accorded to certifying and
disbursing officers in subsections 1395h(i)(1) and 1395h(i)(2) and the
broad, unqualified language of subsection 1395h(i)(3), unambiguously
supported their conclusion that fiscal intermediaries are immune from
suit under the Social Security Act. Body, 156 F.3d at 1111.
Furthermore, the Body court asserted that this reading of the
subsection was "consistent with the broader goals of section 1395h and
the efficient administration of the Medicare system" in light of both the
recognition that "[f]iscal intermediaries . . . function much like an
administrative agency" and the existence of other available remedies for
punishing Medicare fraud. Body, 156 F.3d at 1112.

Although I find the reasoning of the Eleventh Circuit with regard to
Subsection 1395h(i)(3) to be persuasive, subsequent legislation that will
not take effect until October 1, 2005, suggests that Congress may have
intended otherwise. Medicare Prescription Drug, Improvement, and
Page 19
Modernization Act of 2003 § 911(d), Pub.L. No. 108-173, 117
Stat. 2066 (codified at 42 U.S.C. § 1395kk-1 (2003)). Section 911 of
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 amends the Social Security Act as follows:

(1) Certifying officer. No individual designated
pursuant to a contract under this section as a
certifying officer shall, in the absence of the
reckless disregard of the individual's
obligations or the intent by that individual to
defraud the United States, be liable with
respect to any payments certified by the
individual under this section.

(2) Disbursing officer. No disbursing officer
shall, in the absence of the reckless disregard
of the officer's obligations or the intent by
that officer to defraud the United States, be
liable with respect to any payment by such
officer under this section if it was based upon
an authorization (which meets the applicable
requirements for such internal controls
established by the Comptroller General of the
United States) of a certifying officer
designated as provided in paragraph (1) of this
subsection.

(3) Liability of medicare administrative
contractor.

(A) In general. No medicare administrative
contractor shall be liable to the United
States for a payment by a certifying or
disbursing officer unless, in connection with
such payment, the medicare administrative
contractor acted with reckless disregard of
its obligations under its medicare
administrative contract or with intent to
defraud the United States.

(B) Relationship to false claims act. Nothing
in this subsection shall be construed to limit
liability for conduct that would constitute a
violation of sections 3729 through 3731 of
title 31, United States Code.

Medicare Prescription Drug, Improvement, and Modernization Act of
2003 § 911(d), Pub.L. No. 108-173, 117 Stat. 2066 (codified at
42 U.S.C. § 1395kk-1 (2003)). In contrast to 42 U.S.C. § 1395h(i),
§ 911(d)(3)(A) unambiguously states that Medicare contractors are
granted the same limited liability as certifying and disbursing
officers. Congress' insertion of specific qualifying
Page 20
language, in fact the same qualifying language as applies to
certifying and disbursing officers, eliminates the ambiguity on which the
Body decision rests and suggests that Congress does not, in
fact, intend Medicare contractors to have full statutory immunity.
Furthermore, the discussion on the Senate floor prior to passage of the
legislation indicates that the purpose of § 911(d) was to clarify,
not change, existing law. 149 Cong. Rec. § 15606 (2003). The comments
of Senator Grassley are informative:

[T]he language contained in section 911 of the
conference agreement clarifies that Medicare
administrative contractors are not liable for
inadvertent billing errors but, as in the
past, are liable for all damages resulting
from reckless disregard or intent to defraud the
United States. . . . This legislation makes it
clear that the False Claims Act continues, as
in the past, to remain available as a remedy
for fraud against Medicare by certifying officers,
disbursing officers, and Medicare administrative
contractors alike and that, among other things,
the remedy subjects Medicare contractors to
administrative, as well as trust fund, damages.

Id. (emphasis added).

In addition, the statutory immunity recognized by the Body
court was limited to claims for the recovery of Medicare payments
certified and disbursed by the Medicare contractor. The Body
court specifically recognized that fiscal intermediaries would still be
liable for "charges to the government for services the intermediary did
not perform." Body, 156 F.3d at 1112. Thus, Body does
not bar the United States' claim that Highmark presented false or
fraudulent claims when it billed CMS for contractual administrative
services performed in breach of the parties' contract. See also
United States ex rel. Sarasola v. Aetna Life Ins. Co.,
319 F.3d 1292, 1302 (11th Cir. 2003) ("If [the fiscal intermediary] in fact,
failed to fulfill its contractual obligation . . . then it might be
liable to the United States, or a qui tam relator, under the
False Claims Act for submitting a claim for payment for . . . services
never rendered."). For these reasons, I deny Highmark's motion to dismiss
this count and defer ruling on Highmark's statutory immunity from suit
under
Page 21
the FCA until parties have had the opportunity to thoroughly brief
the issue and have oral argument, preferably at the time of summary
judgment.

C. The Remaining Charges  Count III, IV, V, and
Relator's Claim

Because I find that the United States has sufficiently stated a claim
upon which relief could be granted in Counts III, IV, and V, I also deny
Highmark's motion to dismiss these charges. I also find that the relator
has sufficiently stated personal claims against Highmark for unlawful
retaliation pursuant to 31 U.S.C. § 3730(h) such that she too will be
permitted to proceed.

ORDER
Page 22

AND NOW, this ___ day of February 2004, it is
ORDERED that defendant's motion to dismiss the government's
complaint (previously filed as Docket Entry # 45 in Case # 00-3513) and
defendant's motion to dismiss relator's retaliation claim (previously
filed as Docket Entry # 46 in Case # 00-3513) are DENIED.

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